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Media diversity and competition in the digital age

Communications Minister Mitch Fifield has flagged the potential for media reforms in the first half of 2016, including the abolition of the “reach” and “two-out-of-three” rules in the Broadcasting Services Act 1992 (Cth). Supporters argue that these two rules are irrelevant to the digital age following the rise of competitive, internet-based platforms to the traditional triumvirate of free to air television, radio and newspapers. Others have expressed concerns about the viability of regional stations and the ability of regional Australians to access local content if these rules are abolished.

ACCC, SECTION 50 AND DIVERSITY

Rod Sims, Chairman of the Australian Competition and Consumer Commission (ACCC) recently suggested that the ACCC can protect media diversity, stating that “[u]nder the competition laws we look at diversity as much we look at price.” However, while diversity can mean different things to different stakeholders, competition laws are focussed on economic impacts. Section 50 prohibits a substantial lessening of competition in a market.

The Chairman seems to be indicating that the ACCC will focus on non-price competition when examining any transactions in this space – e.g. provision of quality product, service levels. Given that the majority of concerns about the proposed reform coalesce around local news and advertising, we consider below how the competition law may be applied in these areas. Given that the ACCC has consistently recognised separate, platform specific markets for local news and advertising in regional areas, we adopt this approach below.

LOCAL ADVERTISING

For advertisers, local television, radio and newspapers are a compelling proposition as they offer a targeted audience at lower cost. Many internet based platforms are national or international in scope (e.g. twitter, instagram, facebook), although some now offer advertisers the ability to geo-target their ads to local or hyper local regions. However, significant evidence of advertisers making the switch would be required to demonstrate that techniques such as geo-targeting are sufficiently effective to enable these platforms to provide a real substitute to advertising on local television or radio.

In addition, the existing licensing regime makes it more challenging for cross-platform substitution between television and radio, given that they have distinct (and often significantly different) geographic areas of operation. Other potentially competitive platforms are unlikely to have sufficient reach (cinema) or equivalent functionality (out of home, local newspaper) to be effective competitors.

LOCAL NEWS

The aggregation and editing of local news by traditional media (local television, radio and newspapers) demonstrates that there are few functional alternatives. While these media companies may increase their reach through new platforms, which also offer an additional avenue for local community groups, emergency services and councils to provide information, this content is not aggregated and edited for viewers. It is therefore more likely to complement rather than substitute for local television and radio. Likewise, traditional media are unlikely to be substitutes for each other in this market.

ABOLITION OF THE REACH RULE: ENABLING REGIONAL/METROPOLITAN MERGERS?

A regional/metropolitan merger is unlikely to result in any overlap in the provision of local news content which is likely to be provided by the regional station only. Similarly, it seems unlikely that there would be significant overlap in advertising, except for some large national advertisers (which may have countervailing power).

While the ACCC may look to whether the merger would result in a deterioration in the quality of local news content, it is not clear that this would equate to a substantial lessening of competition. That said, a reduction in the quality of local news content may well be indicative of less non-price competition.

Reported moves to strengthen the local content requirements placed on regional broadcasters simultaneously with reform of these rules may make this unlikely. However, if concerns remain, the ACCC could require behavioural undertakings to maintain any existing local news presence.

The analysis for local advertising is likely to be similar.

ABOLITION OF THE 2 OUT OF 3 RULE: ENABLING FURTHER CROSS-PLATFORM MERGERS?

The ACCC’s use of platform specific local news and advertising markets could be good news for cross-platform mergers. These transactions do not result in aggregation in platform specific markets. Unless there is substantial evidence of cross platform substitution in other relevant markets (e.g. national advertising), or the merged entity ends up with a ‘must have’ portfolio of advertising opportunities that are able to be bundled, ACCC clearance seems likely.

A SPORTING CHANCE FOR PAY TV?

There are reports of a push for the concurrent relaxation of the anti-siphoning restrictions. While this could reduce viewers for free to air television and therefore reduce the relative importance of local free to air television advertising; it is unlikely to have a significant impact on the above analysis.

Compare jurisdictions: Merger Control

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